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Source: (consider it)
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Thread: fixing Social Security
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Josephine
Orthodox Belle
# 3899
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Posted
I heard an elected official saying this week that Social Security is unsustainable, and it's going to be broke in 20 years (or whatever it is), so the only responsible thing to do is to cut benefits now, so we don't have to abandon the whole enterprise when we run out of money for it in a couple of decades.
I was disappointed (but not surprised) that the person interviewing him didn't ask why that was the only responsible thing to do, and what other options he'd considered and ruled out.
One option that seems blindingly obvious is to increase the amount of income on which one pays Social Security tax.
Currently, the SS tax is 6.2 percent on income under $113,700, and 0.0 percent on income over $113,700. Your employer pays another 6.2 percent on your income under $113,700, for a total of 12.4 percent.
I do agree that it would be difficult to increase the rate of SS tax on people making less than $113,700. But it would be relatively simple to make the tax apply to all income. And the benefit of that would be that you could lower the tax rate. The Medicare tax rate is currently 2.9% on all earned income
Social Security expenditures in 2008, according to Wikipedia, were over $600 billion. Let's assume that Social Security expenditures are going up -- let's say to $800 billion a year. The total personal income in the US in 2012 was over $13 trillion. So if we taxed all personal income, the total rate would have to be about 6% -- that's 3% for you, 3% for your employer (or a total of 6% for self-employed and for non-earned personal income).
Slashing the rates by half would be a good thing -- put more money in the pockets of people and businesses. Putting Social Security on a sound financial position would be a good thing.
So why isn't this the most responsible thing we could do? Why aren't we, and our representatives, talking about doing something like this?
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I've written a book! Catherine's Pascha: A celebration of Easter in the Orthodox Church. It's a lovely book for children. Take a look!
Posts: 10273 | From: Pacific Northwest, USA | Registered: Jan 2003
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Arethosemyfeet
Shipmate
# 17047
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Posted
You're making the assumption that most of the house of representatives would see saving social security as a good thing, rather than getting rid of it being a moral imperative.
Posts: 2933 | From: Hebrides | Registered: Apr 2012
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Palimpsest
Shipmate
# 16772
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Posted
Like the recent budget negotiations, discussions would require a common purpose like fixing Social Security rather than eliminating it in stages.
The simplest thing would be to extend the tax without a salary cap. I wouldn't bother with trying to complicate it with offset tax cuts or you get into a long fight over where to cut taxes.
There's a good NY Times fixing social security ( pay wall after limited number of articles) talking about indexing options.
[ 27. October 2013, 05:42: Message edited by: Palimpsest ]
Posts: 2990 | From: Seattle WA. US | Registered: Nov 2011
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Dave W.
Shipmate
# 8765
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Posted
quote:
Originally posted by Josephine:
Slashing the rates by half would be a good thing -- put more money in the pockets of people and businesses. Putting Social Security on a sound financial position would be a good thing.
So why isn't this the most responsible thing we could do? Why aren't we, and our representatives, talking about doing something like this?
If a reform is successful in increasing revenues to fund SS, it can't also "put more money in the pockets of people and businesses" - at least, not in net terms.
You're essentially proposing a flat tax on all income; for those making substantially more than the current cap, compared to what we have now it would be a very large rate increase, not a decrease.
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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Josephine
Orthodox Belle
# 3899
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Posted
quote:
Originally posted by Dave W.:
quote:
Originally posted by Josephine:
Slashing the rates by half would be a good thing -- put more money in the pockets of people and businesses. Putting Social Security on a sound financial position would be a good thing.
So why isn't this the most responsible thing we could do? Why aren't we, and our representatives, talking about doing something like this?
If a reform is successful in increasing revenues to fund SS, it can't also "put more money in the pockets of people and businesses" - at least, not in net terms.
You're essentially proposing a flat tax on all income; for those making substantially more than the current cap, compared to what we have now it would be a very large rate increase, not a decrease.
I don't like flat taxes. But changing SS to a progressive tax ain't gonna happen. And I don't think it needs to happen. It should be possible to revise the SS tax so that it covers all income for everyone, rather than all income for almost everyone.
It's possible that the figures I dug out last night are wrong. I suspect they are. I suspect that the total income for the country is higher than I found, and if that's true, then the flat tax rate required to keep Social Security solvent would be smaller than 3%. Maybe a lot smaller.
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I've written a book! Catherine's Pascha: A celebration of Easter in the Orthodox Church. It's a lovely book for children. Take a look!
Posts: 10273 | From: Pacific Northwest, USA | Registered: Jan 2003
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Arethosemyfeet
Shipmate
# 17047
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Posted
quote:
Originally posted by Dave W.:
If a reform is successful in increasing revenues to fund SS, it can't also "put more money in the pockets of people and businesses" - at least, not in net terms.
It would increase the median net income, certainly, and cut the mean. Generally when we're talking about income, nobody cares about the mean. A raised mean just suggests Warren Buffet had a good year. A rise in the net income of those at the lower end does tend to increase the velocity of money and, yes, put more money in the pockets of both people and businesses. Regressive taxation puts a brake on economic growth far more than progressive or at least flat taxation.
Posts: 2933 | From: Hebrides | Registered: Apr 2012
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Dave W.
Shipmate
# 8765
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Posted
quote:
Originally posted by Arethosemyfeet:
quote:
Originally posted by Dave W.:
If a reform is successful in increasing revenues to fund SS, it can't also "put more money in the pockets of people and businesses" - at least, not in net terms.
It would increase the median net income, certainly, and cut the mean. Generally when we're talking about income, nobody cares about the mean.
Generally when we're talking about income, nobody cares about the mean or the median - they care about their own income. But in any case I wasn't talking about the mean, I was talking about the aggregate. quote:
A rise in the net income of those at the lower end does tend to increase the velocity of money and, yes, put more money in the pockets of both people and businesses. Regressive taxation puts a brake on economic growth far more than progressive or at least flat taxation.
But the first order effect is not to "put more money in the pockets of both people and businesses" - it's to take more money from some and distribute it to others. I don't dispute that there could be a second order effect on growth from reducing rates at the low end, but it's not obvious that it would be larger than the tax increase required in the first place. (We did reduce the payroll tax in 2011 and 2012 to support the economy, after all - but that did add to the deficit.)
Josephine - I found a set of annotated slides based on the 2013 SS Board of Trustees report here (pdf) - the notes for page 33 say that earnings above the tax cap amount to about 17% of aggregate earnings, so we're only taxing 83%. If we're currently paying 12.4% on the income below the cap, this means we could raise the same amount of revenue by removing the cap and changing the rate to 10.3% (10.3% x 100% = 12.4% x 83%). This only lets us cut the rates by 17%, not 50% - and we'd still only be collecting the current amount, not increasing revenue to close projected deficits.
Notes to another slide in that deck (p. 16) say 6% of all workers earn more than the tax cap - nearly all of them would be affected if the cap were removed. I suspect it would be politically very difficult to make this change, particularly when recalling the reaction to Obama's proposal to raise taxes only on people making more than $200K.
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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Dave W.
Shipmate
# 8765
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Posted
Oh, and there's another thing to consider - currently, the maximum benefit is linked to the value of the income cap. Currently that maximum is $2533 for an individual retiring in 2013. If we kept the current formula for benefits, some of the revenue collected from removing the cap would go out in additional retirement payments to those high-income people.
Roughly speaking, the SSA records your earnings up to the cap for each year you work; when you retire it computes an average indexed monthly earnings value (indexed = adjusted upward for wage inflation) - again, based only on the amount you earned up to the cap. This average determines the monthly benefit based on two threshold values: you get 90% of the amount under the first threshold, 32% of the amount between the two thresholds, and 15% of the amount above the 2nd threshold (examples here; the threshold values vary depending on when you retire, but it looks like they're roughly at $750 and $4500.) With the formula as it is, removing the cap would add a lot more to the amounts above the 2nd threshold for retiring high earners, and they'd be entitled to get 15% of that value in their monthly benefits.
[ 27. October 2013, 15:46: Message edited by: Dave W. ]
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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Sober Preacher's Kid
Presbymethegationalist
# 12699
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Posted
Paul Krugman has been excellent on this subject, the "Grand Bargain", "Fixing Medicare", etc. It's all code for cutting the welfare state, it's not actually about putting government finance on a steady level.
The people who engage in this debate also conveniently forget that the US has added Social Security surpluses into its general revenues for decades, so as sponsor is on the hook for deficits, and the SS Trust Fund is secured with US Bonds. They are Series EE and non-tradeable, but they are obligations of the United States just the same and have the protection of the 14th Amendment against repudiation.
We have the same fiasco in Canada. The Harper Government bizarrely raised the Old Age Security eligibility age when it patently wasn't necessary. Canada splits income security into two parts, OAS which comes out of general revenues and CPP which is based solely on contributions. We've already "fixed" CPP and the Chief Actuary says it looks good for decades. But something had to be cut, so OAS got it. ![[Disappointed]](graemlins/disappointed.gif)
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NDP Federal Convention Ottawa 2018: A random assortment of Prots and Trots.
Posts: 7646 | From: Peterborough, Upper Canada | Registered: Jun 2007
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Josephine
Orthodox Belle
# 3899
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Posted
quote:
Originally posted by Dave W.:
Josephine - I found a set of annotated slides based on the 2013 SS Board of Trustees report here (pdf) - the notes for page 33 say that earnings above the tax cap amount to about 17% of aggregate earnings, so we're only taxing 83%. If we're currently paying 12.4% on the income below the cap, this means we could raise the same amount of revenue by removing the cap and changing the rate to 10.3% (10.3% x 100% = 12.4% x 83%). This only lets us cut the rates by 17%, not 50% - and we'd still only be collecting the current amount, not increasing revenue to close projected deficits.
Thanks for the link. But it's only talking about earned income, right? Poor people have only earned income. Rich people have mostly or only unearned income.
I don't see any reason that unearned income should be excluded from Social Security taxes. If all personal income were taxed, not just all earned income, that 10.3% rate that you calculated would be even lower.
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I've written a book! Catherine's Pascha: A celebration of Easter in the Orthodox Church. It's a lovely book for children. Take a look!
Posts: 10273 | From: Pacific Northwest, USA | Registered: Jan 2003
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by Josephine:
I heard an elected official saying this week that Social Security is unsustainable, and it's going to be broke in 20 years (or whatever it is), so the only responsible thing to do is to cut benefits now, so we don't have to abandon the whole enterprise when we run out of money for it in a couple of decades.
Social Security pays current year benefits out of current year taxes collected. As such, it cannot "go broke" in the sense of having no money at all to pay benefits unless the U.S. unemployment rate is somewhere around 100%. What is usually meant by those making the dire warnings is that in twenty years (or whatever) Social Security will only be able to pay out benefits equal to 80% of its obligations. So in order to avoid cutting benefits in twenty years (using a projection that the economy stays terrible for the next twenty years) we have to cut benefits now. The logic of such pronouncements is usually lost on me.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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no prophet's flag is set so...
Proceed to see sea
# 15560
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Posted
quote:
Originally posted by Sober Preacher's Kid:
Paul Krugman has been excellent on this subject, the "Grand Bargain", "Fixing Medicare", etc. It's all code for cutting the welfare state, it's not actually about putting government finance on a steady level.
The people who engage in this debate also conveniently forget that the US has added Social Security surpluses into its general revenues for decades, so as sponsor is on the hook for deficits, and the SS Trust Fund is secured with US Bonds. They are Series EE and non-tradeable, but they are obligations of the United States just the same and have the protection of the 14th Amendment against repudiation.
We have the same fiasco in Canada. The Harper Government bizarrely raised the Old Age Security eligibility age when it patently wasn't necessary. Canada splits income security into two parts, OAS which comes out of general revenues and CPP which is based solely on contributions. We've already "fixed" CPP and the Chief Actuary says it looks good for decades. But something had to be cut, so OAS got it.
Your analysis is correct. However, what should be getting it is corporate taxes. Windfall profits for national and multinational corporations and we can't afford basic benefits to all people? Windfall profits to resource extraction companies and we have to allow them to dictate public and civic policy by them deciding what public building they want to have named for their company?
(Mutters revolutionary slogans into his tea and wonders who owns the brick wall we'll be using after we storm Bay Street and its branch plant, parliament. Better start on the beer._
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Out of this nettle, danger, we pluck this flower, safety.
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Posts: 11498 | From: Treaty 6 territory in the nonexistant Province of Buffalo, Canada ↄ⃝' | Registered: Mar 2010
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teddybear
Shipmate
# 7842
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Posted
Another thing that would save it, would be to stop allowing Congress to steal money from the fund and also force them pay back all the money they've stolen over the years.
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My cooking blog: http://inthekitchenwithdon.blogspot.com/
Posts: 480 | From: Topeka, Kansas USA | Registered: Jul 2004
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by teddybear:
Another thing that would save it, would be to stop allowing Congress to steal money from the fund and also force them pay back all the money they've stolen over the years.
Another misconception. First a little background in service of the explanation.
Social Security, as originally constituted. was premised on the idea that the U.S. population will continue to grow at a steady, relatively constant rate. Unfortunately this idea turned out not to be the case due to the Baby Boom, during which population grew rapidly and suddenly. To fix this problem the Social Security tax rate was increased to the current rate of 12.4%* in 1984 as part of a series of reforms. The idea was to collect more funds than were needed to pay for current benefits in order to build up a "trust fund" for when the Boomers retired. Sometime in the next ten years the Social Security Administration will stop running a surplus and start running a deficit as it starts to pay out benefits to the Baby Boom generation. This is what it's designed to do. Sometime around the mid-2040s, depending on how the economy does in the meantime, the trust fund will be depleted. Not entirely coincidentally, by the mid-2040s the majority of the Baby Boomers are expected to have left the Social Security rolls (a.k.a. died).
At any rate, if you're running a surplus the question becomes what to do with it. You can keep a giant vault full of cash, or you can earn a moderate return by investing in some safe form of financial instrument. In the case of the SSA, they chose U.S. treasury bonds, which are (usually) regarded as an incredibly safe place to stash funds. At any rate, it's inaccurate to say Congress has been "stealing" money from the SSA in a sense that you wouldn't say it had been "stealing" money from the People's Bank of China, unless you think it's more likely that the U.S. will renege on the bonds held by a whole bunch of elderly voters than it is to renege on bonds held by a foreign central bank. I'd also point out that if you're positing that the U.S. government is willing to ignore the value of monetary instruments it has issued, the SSA would do no better by its other option, hoarding a giant pile of cash, since cash is also a paper monetary instrument issued by the federal government.
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*6.2% paid by the employee and 6.2% paid by the employer. You're responsible for the full 12.4% if you're self-employed.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Dave W.
Shipmate
# 8765
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Posted
quote:
Originally posted by Josephine:
quote:
Originally posted by Dave W.:
Josephine - I found a set of annotated slides based on the 2013 SS Board of Trustees report here (pdf) - the notes for page 33 say that earnings above the tax cap amount to about 17% of aggregate earnings, so we're only taxing 83%. If we're currently paying 12.4% on the income below the cap, this means we could raise the same amount of revenue by removing the cap and changing the rate to 10.3% (10.3% x 100% = 12.4% x 83%). This only lets us cut the rates by 17%, not 50% - and we'd still only be collecting the current amount, not increasing revenue to close projected deficits.
Thanks for the link. But it's only talking about earned income, right? Poor people have only earned income. Rich people have mostly or only unearned income.
I don't see any reason that unearned income should be excluded from Social Security taxes. If all personal income were taxed, not just all earned income, that 10.3% rate that you calculated would be even lower.
If the proposed solution boils down to "tax the rich to pay for it," then do we really need to ask (as you do in the OP) "Why aren't we, and our representatives, talking about doing something like this?"
Not that there's no reason to explore these questions, but it seems to me that whatever answer one would generally supply to questions of the form "why don't we tax the rich to pay for X" would suffice here also.
Also, I'm not sure that broadening the base from "all earned income" to "all personal income" changes things as much as you might expect. In 2011, total income reported on all tax returns was $7.8T, while total income from salaries and wages all $5.4T. This suggests the total rate might go to 7.1% - but again, this is still just to get the current level of revenue, not to close the deficit gap, and it would represent an even larger tax hike for the rich.
One objection in principle to this approach is that SS was originally conceived as a kind of insurance against poverty in old age, and as such one's contributions were (at least loosely) linked to one's potential benefits. Removing the cap and broadening the base without adjusting the benefits distribution would pretty much destroy this conception and largely replace it with a wealth redistribution scheme.
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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Dave W.
Shipmate
# 8765
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Posted
quote:
Originally posted by Crœsos:
In the case of the SSA, they chose U.S. treasury bonds, which are (usually) regarded as an incredibly safe place to stash funds. At any rate, it's inaccurate to say Congress has been "stealing" money from the SSA in a sense that you wouldn't say it had been "stealing" money from the People's Bank of China, unless you think it's more likely that the U.S. will renege on the bonds held by a whole bunch of elderly voters than it is to renege on bonds held by a foreign central bank.
Well, you'd think the US wouldn't do such a thing, wouldn't you? It would be crazy, right? But if you elect enough people determined to prove that the government is unreliable, who knows what might happen? Apparently we're good through Feb 7, but after that...
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by Dave W.:
If the proposed solution boils down to "tax the rich to pay for it," then do we really need to ask (as you do in the OP) "Why aren't we, and our representatives, talking about doing something like this?"
Not that there's no reason to explore these questions, but it seems to me that whatever answer one would generally supply to questions of the form "why don't we tax the rich to pay for X" would suffice here also.
In the case of Social Security, the reason for the relevance of the question is that any shortfall anticipated in the program is due mostly to shifts the American income distribution curve. A much larger proportion of the current GDP is in income exempt from Social Security Tax, either above the income cap or in the form of capital gains, than was the case in the mid-1980s when the last major revision of Social Security was implemented. In short, if the source of the problem is that "the rich" are removing a larger percentage of the economy from paying in on Social Security, that seems like something very relevant to the program's continuance.
quote:
Originally posted by Dave W.:
One objection in principle to this approach is that SS was originally conceived as a kind of insurance against poverty in old age, and as such one's contributions were (at least loosely) linked to one's potential benefits. Removing the cap and broadening the base without adjusting the benefits distribution would pretty much destroy this conception and largely replace it with a wealth redistribution scheme.
No, the program as initially implemented was always "a wealth redistribution scheme", redistributing wealth from current taxpayers to current retirees. It's thinking of it like some kind of retirement investment or pre-paid annuity that would severely alter (or destroy) the initial conception of the program.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Dave W.
Shipmate
# 8765
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Posted
quote:
Originally posted by Crœsos:
quote:
Originally posted by Dave W.:
If the proposed solution boils down to "tax the rich to pay for it," then do we really need to ask (as you do in the OP) "Why aren't we, and our representatives, talking about doing something like this?"
Not that there's no reason to explore these questions, but it seems to me that whatever answer one would generally supply to questions of the form "why don't we tax the rich to pay for X" would suffice here also.
In the case of Social Security, the reason for the relevance of the question is that any shortfall anticipated in the program is due mostly to shifts the American income distribution curve. A much larger proportion of the current GDP is in income exempt from Social Security Tax, either above the income cap or in the form of capital gains, than was the case in the mid-1980s when the last major revision of Social Security was implemented. In short, if the source of the problem is that "the rich" are removing a larger percentage of the economy from paying in on Social Security, that seems like something very relevant to the program's continuance.
That's an interesting point, and sounds quite plausible to me. Do you happen to know how much of the problem it really is? quote:
quote:
Originally posted by Dave W.:
One objection in principle to this approach is that SS was originally conceived as a kind of insurance against poverty in old age, and as such one's contributions were (at least loosely) linked to one's potential benefits. Removing the cap and broadening the base without adjusting the benefits distribution would pretty much destroy this conception and largely replace it with a wealth redistribution scheme.
No, the program as initially implemented was always "a wealth redistribution scheme", redistributing wealth from current taxpayers to current retirees. It's thinking of it like some kind of retirement investment or pre-paid annuity that would severely alter (or destroy) the initial conception of the program.
I disagree - it is in no way an innovation to think of Social Security a kind of social insurance - it's been considered that way from the very beginning. For example, when Roosevelt's Secretary of Labor Frances Perkins promoted administration proposals in a national radio address in 1935, she used the word "insurance" 16 times - and the title of the address was "Social Insurance for U.S."
To insist that it should be considered wealth redistribution just because current benefits are paid from current contributions is to confuse a financing provision for the policy intent.
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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moron
Shipmate
# 206
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Posted
quote:
Originally posted by Josephine:
Rich people have mostly or only unearned income.
God help me I'm biting on a Josephine thread. ![[Razz]](tongue.gif)
Why do you hate Rich people?
Posts: 4236 | From: Bentonville | Registered: May 2001
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by Dave W.:
quote:
Originally posted by Crœsos:
In the case of Social Security, the reason for the relevance of the question is that any shortfall anticipated in the program is due mostly to shifts the American income distribution curve. A much larger proportion of the current GDP is in income exempt from Social Security Tax, either above the income cap or in the form of capital gains, than was the case in the mid-1980s when the last major revision of Social Security was implemented. In short, if the source of the problem is that "the rich" are removing a larger percentage of the economy from paying in on Social Security, that seems like something very relevant to the program's continuance.
That's an interesting point, and sounds quite plausible to me. Do you happen to know how much of the problem it really is?
According to the SSA's own data, the percentage of the GDP subject to Social Security tax was 42% in 1983 when Reagan and Greenspan were last reforming Social Security to deal with the demographic wave of Baby Boomers. In 2012 (the last year for which the SSA lists data) the proportion was 36.3%. U.S. GDP was just above US$16 trillion in 2012, so the shifting of income had moved about US$1,088 billion out of income streams subject to Social Security Tax, relative to the income distribution in 1983. At a tax rate of 12.4% this comes to US$135 billion not paid in to Social Security for 2012. At the now-expired Obama payroll tax cut rate of 10.4% (which was in effect in 2012) it comes to US$113 billion in taxes not collected for that year. For a sense of proportion, in 2012 the Social Security Administration had US$768 billion in total outlays, covering both benefits paid and operating expenses.
quote:
Originally posted by Dave W.:
I disagree - it is in no way an innovation to think of Social Security a kind of social insurance - it's been considered that way from the very beginning. For example, when Roosevelt's Secretary of Labor Frances Perkins promoted administration proposals in a national radio address in 1935, she used the word "insurance" 16 times - and the title of the address was "Social Insurance for U.S."
To insist that it should be considered wealth redistribution just because current benefits are paid from current contributions is to confuse a financing provision for the policy intent.
I'm not sure intent and financing can be so easily separated. And given that all forms of government expenditure qualify as "wealth redistribution", I'm not sure why it's important to single out social spending with this label.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Dave W.
Shipmate
# 8765
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Posted
quote:
Originally posted by Crœsos:
quote:
Originally posted by Dave W.:
quote:
Originally posted by Crœsos:
In the case of Social Security, the reason for the relevance of the question is that any shortfall anticipated in the program is due mostly to shifts the American income distribution curve. A much larger proportion of the current GDP is in income exempt from Social Security Tax, either above the income cap or in the form of capital gains, than was the case in the mid-1980s when the last major revision of Social Security was implemented. In short, if the source of the problem is that "the rich" are removing a larger percentage of the economy from paying in on Social Security, that seems like something very relevant to the program's continuance.
That's an interesting point, and sounds quite plausible to me. Do you happen to know how much of the problem it really is?
According to the SSA's own data, the percentage of the GDP subject to Social Security tax was 42% in 1983 when Reagan and Greenspan were last reforming Social Security to deal with the demographic wave of Baby Boomers. In 2012 (the last year for which the SSA lists data) the proportion was 36.3%. U.S. GDP was just above US$16 trillion in 2012, so the shifting of income had moved about US$1,088 billion out of income streams subject to Social Security Tax, relative to the income distribution in 1983. At a tax rate of 12.4% this comes to US$135 billion not paid in to Social Security for 2012. At the now-expired Obama payroll tax cut rate of 10.4% (which was in effect in 2012) it comes to US$113 billion in taxes not collected for that year. For a sense of proportion, in 2012 the Social Security Administration had US$768 billion in total outlays, covering both benefits paid and operating expenses.
Thanks for that, Croesus. But this just says that SS would have collected more money if the ratio of taxable payroll to GDP had remained the same - it doesn't say that the shift actually resulted in less revenue than expected. For that to be the case, we'd need to at least show that the amount of taxable income (not just the its share of GDP) fell short of projections. (This may be true, but it still needs support.)
From what I can tell, the 2013 trustees report doesn't seem to point to this as a cause for the shortfall - it blames demographics: quote:
Projected OASDI cost generally increases more rapidly than projected noninterest income through about 2035 primarily because the retirement of the baby-boom generation will increase the number of beneficiaries much faster than the numbers of workers increases, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages.
I might add that I'm generally on board with criticisms of the skew of recent economic gains to the rich; I just haven't seen evidence that's a big part of the problem we're discussing here. quote:
quote:
Originally posted by Dave W.:
I disagree - it is in no way an innovation to think of Social Security a kind of social insurance - it's been considered that way from the very beginning. For example, when Roosevelt's Secretary of Labor Frances Perkins promoted administration proposals in a national radio address in 1935, she used the word "insurance" 16 times - and the title of the address was "Social Insurance for U.S."
To insist that it should be considered wealth redistribution just because current benefits are paid from current contributions is to confuse a financing provision for the policy intent.
I'm not sure intent and financing can be so easily separated. And given that all forms of government expenditure qualify as "wealth redistribution", I'm not sure why it's important to single out social spending with this label.
I think that most people would make a distinction between government payrolls and purchases of goods and services on the one hand and transfer payments to individuals on the other, even if you don't. And in the category of transfer payments, I'm arguing that SS currently isn't generally considered wealth redistribution, that it's the rough link between contributions and benefits that maintains its identity as a social insurance program, and that it's probably important to the survival of SS to maintain this distinction.
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by Dave W.:
Thanks for that, Croesus. But this just says that SS would have collected more money if the ratio of taxable payroll to GDP had remained the same - it doesn't say that the shift actually resulted in less revenue than expected. For that to be the case, we'd need to at least show that the amount of taxable income (not just the its share of GDP) fell short of projections. (This may be true, but it still needs support.)
As far as I can tell, the 1983 Trustee's Report does not even consider the possibility that income redistribution would move a sizable chunk of GNP* out of taxable payroll. See the table on p. 18 of this PDF, where the clear underlying assumption is that taxable wages will grow somewhat faster than the overall economy, even in a worst-case scenario. We know thirty years on that the reverse has been the case. In many ways this is roughly analogous to the way those formulating Social Security in 1935 didn't anticipate the Baby Boom. What they couldn't predict due to uncertainty, we can see clearly because we're living in the middle of it.
quote:
Originally posted by Dave W.:
And in the category of transfer payments, I'm arguing that SS currently isn't generally considered wealth redistribution, that it's the rough link between contributions and benefits that maintains its identity as a social insurance program, and that it's probably important to the survival of SS to maintain this distinction.
I'd argue that the key to the survival of Social Security is that it's universally available, not that it scales roughly to the standard of living you had when you were working. Programs for poor people tend to be poor programs. Programs for everyone tend to be popular with everyone.
Take disaster relief as another example of wealth redistribution/social insurance. Such programs are popular (when needed) not because the disaster victim with the big house gets a bigger check for rebuilding than the disaster victim with the little house, but because it's there for everyone.
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*A slight complication is that the reports of the mid-eighties measure the economy in terms of GNP while current reports measure in terms of GDP.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Timothy the Obscure
Mostly Friendly
# 292
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Posted
quote:
Originally posted by moron:
quote:
Originally posted by Josephine:
Rich people have mostly or only unearned income.
God help me I'm biting on a Josephine thread.
Why do you hate Rich people?
What an odd question.
However, it makes me suspect you don't know the definition (it is a term of art, I guess) of "unearned income." "Earned income" means wages, salaries, and tips--i.e., income you work for. "Unearned income" means income from investment (interest, dividends, and capital gains) which, by US tax law is taxed at a lower rate, and is not subject to Social Security tax.
I don't say one should hate rich people--but there is a very robust body of research demonstrating that being rich makes people less ethical and less empathetic. So maybe it's ultimately for their own good that we tax them heavily (just the subjective experience of feeling poor makes people kinder).
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When you think of the long and gloomy history of man, you will find more hideous crimes have been committed in the name of obedience than have ever been committed in the name of rebellion.
- C. P. Snow
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Russ
Old salt
# 120
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Posted
quote:
Originally posted by Timothy the Obscure:
maybe it's ultimately for their own good that we tax them heavily (just the subjective experience of feeling poor makes people kinder).
You think taking people's money away from them makes them more willing to part voluntary with some of what they have left ?
I think your psychology is all wrong. I think people put more money in the collection plate if they don't have to pay to get into the church. I think motorists are more likely to stop and let pedestrians cross at a Give Way junction than during the green phase at a traffic light junction (an analogy in terms of giving time rather than money).
Maybe "feeling poor" isn't quite the same thing as "feeling mugged"...
Best wishes,
Russ
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Wish everyone well; the enemy is not people, the enemy is wrong ideas
Posts: 3169 | From: rural Ireland | Registered: May 2001
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Dave W.
Shipmate
# 8765
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Posted
quote:
Originally posted by Crœsos:
quote:
Originally posted by Dave W.:
Thanks for that, Croesus. But this just says that SS would have collected more money if the ratio of taxable payroll to GDP had remained the same - it doesn't say that the shift actually resulted in less revenue than expected. For that to be the case, we'd need to at least show that the amount of taxable income (not just the its share of GDP) fell short of projections. (This may be true, but it still needs support.)
As far as I can tell, the 1983 Trustee's Report does not even consider the possibility that income redistribution would move a sizable chunk of GNP* out of taxable payroll. See the table on p. 18 of this PDF, where the clear underlying assumption is that taxable wages will grow somewhat faster than the overall economy, even in a worst-case scenario.
Again, thanks Croesus - but I think that table may actually show the opposite. "Average waves in covered employment" are projected to rise faster than real GNP in every scenario, as you say - but then the next column shows the projected consumer price index, and the "real wage differential" in the 4th column (being the difference between 2nd and 3rd columns) appears to be the real rate of increase in taxable wages. It's this value that should be compare to real GNP increase, I think - and it shows a projected growth rate slower than that of real GNP, not faster. quote:
quote:
Originally posted by Dave W.:
And in the category of transfer payments, I'm arguing that SS currently isn't generally considered wealth redistribution, that it's the rough link between contributions and benefits that maintains its identity as a social insurance program, and that it's probably important to the survival of SS to maintain this distinction.
I'd argue that the key to the survival of Social Security is that it's universally available, not that it scales roughly to the standard of living you had when you were working. Programs for poor people tend to be poor programs. Programs for everyone tend to be popular with everyone.
I don't doubt that there are several important aspects to general support for SS, but I think a big shift from the current concept towards "tax the rich to fund pensions for everyone else" is going to be less popular than you seem to think. (I think your argument about shifts to non-taxable income as a cause of the deficit might make this shift easier, but I'm still not convinced that it's true - though maybe the literal truth doesn't matter so much when it comes to evaluating its persuasive power.) quote:
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*A slight complication is that the reports of the mid-eighties measure the economy in terms of GNP while current reports measure in terms of GDP.
And in addition, my counter-argument about comparing only real values is somewhat complicated by the fact that the CPI isn't quite the same as the GNP deflator...
Posts: 2059 | From: the hub of the solar system | Registered: Nov 2004
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moron
Shipmate
# 206
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Posted
quote:
Originally posted by Timothy the Obscure:
So maybe it's ultimately for their own good that we tax them heavily (just the subjective experience of feeling poor makes people kinder).
What Russ said but I'll post anyway.
Maybe it is that people who apparently (not accusing Timothy who I know nothing about) who have done little more than live on the public dole and whine about their lot in life should be the people who dictate to others how much they should cough up to the public coffers, but in a better world it would not be that way.
Posts: 4236 | From: Bentonville | Registered: May 2001
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by moron:
Maybe it is that people who apparently (not accusing Timothy who I know nothing about) who have done little more than live on the public dole and whine about their lot in life should be the people who dictate to others how much they should cough up to the public coffers, but in a better world it would not be that way.
That seems a particularly uncharitable, not to mention inaccurate, way to describe recipients of Social Security benefits.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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moron
Shipmate
# 206
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Posted
quote:
Originally posted by Crœsos:
That seems a particularly uncharitable, not to mention inaccurate, way to describe recipients of Social Security benefits.
That is more than fair.
You might understand I was brought to something close to my fruition by people who seemed unreserved about blaming 'conservatives', for their ills.
Oh wait.
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Doc Tor
Deepest Red
# 9748
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Posted
quote:
Originally posted by moron:
Maybe it is that people who apparently (not accusing Timothy who I know nothing about) who have done little more than live on the public dole and whine about their lot in life should be the people who dictate to others how much they should cough up to the public coffers, but in a better world it would not be that way.
I'm guessing that the US Social Security is very much like UK Social Security. Most people who are on it are in work.
Take this as just one small example.
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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moron
Shipmate
# 206
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Posted
quote:
Originally posted by Doc Tor:
Take this as just one small example.
Eisenhower was prophetic!
Don't ask me how I know, except to say my son who paid the necessary dues to become a 'Navy Diver' just spent much of Tuesday amusing me with his misogynistic views on things. And who could argue?
Most importantly we mutually saw and enjoyed Mike Scott and the current lads at the Civic Theater in NO LA. Wish you were there.
Posts: 4236 | From: Bentonville | Registered: May 2001
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Doc Tor
Deepest Red
# 9748
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Posted
quote:
Originally posted by moron:
quote:
Originally posted by Doc Tor:
Take this as just one small example.
Eisenhower was prophetic!
Don't ask me how I know, except to say my son who paid the necessary dues to become a 'Navy Diver' just spent much of Tuesday amusing me with his misogynistic views on things. And who could argue?
Most importantly we mutually saw and enjoyed Mike Scott and the current lads at the Civic Theater in NO LA. Wish you were there.
Have you simply run out of argument?
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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ken
Ship's Roundhead
# 2460
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Posted
quote:
Originally posted by Doc Tor:
I'm guessing that the US Social Security is very much like UK Social Security. Most people who are on it are in work.
Take this as just one small example.
Its more like our old-age pensions.
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Ken
L’amor che move il sole e l’altre stelle.
Posts: 39579 | From: London | Registered: Mar 2002
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moron
Shipmate
# 206
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Posted
quote:
Originally posted by Doc Tor:
Have you simply run out of argument?
You are only now asking that? ![[Paranoid]](graemlins/paranoid.gif)
It MAY be the case... still waiting to hear about those potential openings. And even if they don't occur PM to see if we might hook up: I'll let you shoot my Ruger Government Model - it is a sweet .22 semi-automatic with next to no recoil. The bull barrel is the secret, and you could drive tacks. ![[Votive]](graemlins/votive.gif)
How are book sales?
Posts: 4236 | From: Bentonville | Registered: May 2001
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Sober Preacher's Kid
Presbymethegationalist
# 12699
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Posted
moron, you just haven't been the same since you predicted Obama would lose again and were wrong, again.
You've been making even less sense than usual lately.
[ 04. November 2013, 23:30: Message edited by: Sober Preacher's Kid ]
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NDP Federal Convention Ottawa 2018: A random assortment of Prots and Trots.
Posts: 7646 | From: Peterborough, Upper Canada | Registered: Jun 2007
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moron
Shipmate
# 206
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Posted
quote:
Originally posted by Sober Preacher's Kid:
moron, you just haven't been the same since you predicted Obama would lose again and were wrong, again.
I remember you being as gracious as you can then too. Many other people were at least amusing in their vitriol.
It's almost time for another political thread - can just FEEL it in the aether...
Posts: 4236 | From: Bentonville | Registered: May 2001
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Golden Key
Shipmate
# 1468
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Posted
quote:
Originally posted by ken:
Its more like our old-age pensions.
Yes, exactly. And the people who get it have worked, or are surviving spouses of someone who worked, or surviving kids.
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Blessed Gator, pray for us!
--"Oh bat bladders, do you have to bring common sense into this?" (Dragon, "Jane & the Dragon")
--"Oh, Peace Train, save this country!" (Yusuf/Cat Stevens, "Peace Train")
Posts: 18601 | From: Chilling out in an undisclosed, sincere pumpkin patch. | Registered: Oct 2001
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